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MARKETS & INVESTING | Staff Reporter, Hong Kong
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Millenial investors are short-term oriented: report

They hold investments for only 2.6 years.

It has been noted that Investors in Hong Kong also have a relatively short-term investment view.

According to a release from Schroders, while advisers usually recommend a minimum 5-year holding period for mutual fund investments, investors reported staying invested for only 3.4 years on average.

Millennials are even more short-term oriented, as they hold their investments for an average of 2.6 years, compared to 4.3 years for their older counterparts.

The report also said Hong Kong investors seem overly optimistic about the level of income that their investments may generate. On average investors would like to generate an investment income of 8.9% per year.

In the current environment where bond yields from key markets are below 1%, coupled with the average stock market yield of around 3.8%, investors with very high income desires will likely be disappointed.

Here's more from Schroders:

Hong Kong investors’ self-belief is high, with very few (11%) admitting to having a less-than-average understanding of investments. Amongst those who describe themselves as having more understanding of investments than average (46%), confidence is higher among Millennials, with 51% of them feeling this way, compared to 41% of their older counterparts.

Positively, there is a strong appetite for investors to learn more. Almost all (94%) investors believe they need to improve their investment understanding.

Chris Durack, CEO of Schroders Hong Kong, said: “In the current environment, aiming for an income in the range of 8% to 9% is a near impossibility without taking on significant levels of risk. However, avoiding risk is also unlikely to allow investors to achieve their investment goals. Instead investors are better off looking for ways to participate in the markets where risk is managed and diversified; one example would be an actively managed multi-asset portfolio.

“We want to highlight that the valuation at which an investment is acquired will have a large bearing on its subsequent return especially over the medium to long term. We have looked into global equity market returns over the last 40 years.

Average annualised 3-year return would be 17%, when entry made at 14 times price-to-earnings, compared to 3.7% when investing at price-to-earnings of 24 times or above*. Now, perhaps more than ever, it is important to invest in assets with sensible valuations. We would also caution that where low average returns are expected to prevail, strategies that involve chasing past performance or a ‘set and forget’ approach can be dangerous.

“Investors have confirmed through our survey the opportunities for investment managers and financial advisers in addressing requirements for quality educational services, investment advice and strategies tailored to meet reasonable return objectives.”

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